Patents and products mean that Chinese smartphone companies are on the march
05Mar12

Chinese companies were among those making a big splash at the recent Mobile World Congress in Barcelona. The event, which took place last week, plays host to most of the leading smartphone and tablet makers, with attendees including CEOs and other high level executives. Several companies use the event as a platform from which to launch new products, enjoying the opportunity to present their wares to an audience of senior mobile phone experts - not to mention the world’s technology press.

A list of new products launched during the event reveals a strong showing for Huawei and ZTE. These companies, two of the biggest technology players in China, were until recently not well known outside of the PRC. However, they are both making impressive inroads into overseas markets, and are moving towards producing high-spec phones as well as entry-level models. ZTE launched four different smartphones at the MWC: two using the Android platform and two using Windows. But the headlines this year belonged to Huawei, which launched what it claims is the world's fastest smartphone, the Ascend D Quad. This new model also signifies Huawei’s ambitions to move into the top end of the smartphone marketplace, having been previously associated with the more budget side of the market.

While the congress is an important event in the mobile phone calendar, it is worth bearing in mind that it is not representative of the whole industry. Most notable by its absence is Apple, which holds its own product launches. Meanwhile, although Samsung launched a number of new tablets in Barcelona, it did not, as had been rumoured, unveil its new Galaxy S III, which has been postponed until later this year. But in terms of providing a snapshot of how smartphone companies are faring, and how the marketplace is reacting to their latest innovations, the event is a good barometer. Based on what happened last week, it is fair to say that Huawei and ZTE are doing pretty well.

This analysis can now be backed up by data from the World Intellectual Property Organisation. Statistics released today (5th March) reveal that two out of the three biggest filers of PCT applications in 2011 are Chinese companies: namely, Huawei and ZTE. The latter took the top spot with 2,826, while Huawei was in third place with 1,831 (Panasonic this year slipped from first to second place with 2,463).

Reports of Huawei and ZTE’s ascendancy will come as no surprise to anyone who is paying any attention to the raging smartphone wars. If you assume that being involved in patent litigation is a sign of a mature company in this area, both Chinese companies are making their presence felt. Huawei has been on the receiving end of suits, but it has also been on the other side of the table. Last April, Motorola settled with the company following a dispute regarding IP Motorola had been trying to sell to Nokia Siemens Networks. Meanwhile ZTE and Ericsson - who had been suing one another in Europe and China - last month signed a settlement agreement ending their argument.

Even more significant is that fact that ZTE and Huawei are involved in patent litigation against one another. In April last year, Huawei sued ZTE in Germany, France and Hungary for allegedly infringing its LTE patents. The next day ZTE returned fire in China, accusing Huawei of infringing its 4G patents. The simple fact that ZTE and Huawei are attacking one another in this way puts paid to any argument that Chinese companies only imitate - both companies clearly feel they have enough quality patents in their respective arsenals to take such high-profile action.

The WIPO figures show that Huawei and ZTE are continuing to file increasing numbers of patents. If they are doing it at PCT level, it is highly likely that they are doing the same domestically as well. Non-Chinese smartphone operators might want to bear this in mind: China is an enormous market and they will need to ensure that their own products are well protected there. ZTE and Huawei are emerging as strong, confident players in the sector, and their enthusiasm for suing anyone who infringes their patents is something that their competitors should take careful note of – especially when it involves the pair playing at home.

However, there is one area where Huawei and ZTE do have some catching up to do. In terms of international name recognition and brand loyalty, they are a long way off being able to compete with the likes of Apple. Yet even here media commentators are predicting big things: so long as Huawei and ZTE continue to make attractive, innovative and user-friendly products, there is no reason why they should not become as familiar as the biggest players within a few years. Headlines warning that Apple needs to watch out for Huawei are perhaps not as sensationalist as they first appear.